Business as usual, Ratan Tata tells staff as company prepares for legal battle
The Tata group filed multiple petitions on Tuesday to pre-empt any one-sided court order against the sacking of chairman Cyrus Mistry, even as patriarch Ratan Tata told the conglomerate’s senior CEOs to carry on work as usual.Cyrus Mistry Exit Updated: Oct 26, 2016 01:05 IST
The Tata group filed multiple petitions on Tuesday to pre-empt any one-sided court order against the sacking of chairman Cyrus Mistry, even as its patriarch Ratan Tata moved swiftly to rally senior CEOs, telling them to stay focused on their work.
Tata Sons, the $103-billion behemoth’s holding company, filed “caveats” in the high courts of Delhi and Mumbai and at the National Company Law Tribunal, a day after Mistry was sacked in a move that stunned corporate India. Caveat, a Latin word meaning ‘beware’, is a court application to prevent an order without hearing the defendant.
Tatas’ legal move elicited a terse statement from the Pallonji group that ruled out a courtroom battle -- for now.
“Tatas have filed caveats seeking notice from Cyrus Mistry, fearing legal action. Cyrus has not filed any caveats,” said a statement from Mistry’s office.
“He has already made a statement that such concerns are misplaced at this stage.”
Mistry, 48, is the son of Pallonji Mistry, the single-largest individual shareholder in Tata Sons, who took over from Ratan Tata as chairman in 2012. There is speculation the Shapoorji Pallonji group might challenge the sacking in court.
The boardroom coup sent shares in some of Tata’s listed companies lower on Tuesday, shaving off about Rs 10,700 crore from the group’s market capitalisation. Separately, Tata Sons reported a 40% fall in revenues for 2015-16, compared to the year ago, filings with the Registrar of Companies showed on Tuesday. Net profits fell 67% during the same period (See box). Tata Sons receives dividends on its shares in the group companies.
BATTLE OF PHILOSOPHIES
Whether such plunge in revenues and profits weighed on the decision to fire Mistry is in the realm of conjecture, but many analysts found the abruptness of his departure uncharacteristic of the Tata group.
Eventually, they say, the battle might have boiled down to the differing business philosophies of Ratan Tata and Mistry. The latter seemed more focused on improving bottom lines, rather than pursuing the expansionist strategy of his illustrious predecessor.
Another reason might have been that Mistry was trying to shake-up the conglomerate’s management structure to draft in new faces for senior positions, sources said.
Mistry’s tough calls on disposing of some Indian Hotels’ overseas properties and flipping over its UK steel operations also did not appear to sit well with the 150-year-old Tata brand’s global aspirations.
In particular, Mistry’s handling of a $1.17-billion arbitration with Japan’s NTT DoCoMo and other non-profitable businesses might have also added to a sense of leadership deficit, the sources said.
The Tata board gave no reason for removing Mistry as head of India’s largest conglomerate, which operates a wide array of industries -- from table salt, IT, steel, power plants and a slew of shopping chains to tea, mobile telephony, luxury cars and hotels, among others.
FINDING A SUCCESSOR
But Ratan Tata, 78, sought to assuage investor and employee concerns at an unscheduled meeting on with group CEOs at Bombay House, the headquarters of the group that runs 28 listed companies and more than 100 subsidiaries in six continents.
“The (group) companies must focus on their market position vis-à-vis competition, and not compare themselves to their own past. The drive must be on leadership rather than to follow,” Tata said.
“This will be for a short time. A new permanent leadership will be in place,” he said, referring to a selection panel to choose a new chairperson within four months.
In 2010, it took the group more than two years to come up with a list that reportedly included Ratan Tata’s half-brother Noel Tata and Pepsico chairperson Indra Nooyi, before Mistry was picked.
Media reports suggest potential full-time replacement of Mistry include Nooyi; N Chandrasekaran, CEO of Tata Consultancy Services (TCS); former Vodafone boss Arun Sarin; family scion Noel Tata; and Ishaat Hussain and B Muthuraman from Tata Group.
The choice could, however, eventually veer to a Tata family scion, touts media reports.
Tata Sons said in a statement late on Tuesday that it added TCS’ Chandrasekaran and Jaguar Land Rover CEO Ralf Speth to its board.
(With agency inputs)